The First Lady Of Finance®

One of the biggest oxymorons is the term Short Sale! Short Sales may be many things but they are never “short” in duration. Short Sales are where the buyer owes more than the value of the home versus REO’s where the home has been foreclosed on and the bank owns the property.

Some people think that a Short Sale is the next step before a foreclosure but that isn’t necessarily true. Sometimes the borrowers just want out of the house they are in because they are moving or even looking for a rental with a lower payment.

If buying is confusing in the first place, Short Sales make that confusion even greater. Looking at some of the terms involved with the Short Sale process may make that process at least a little easier to understand. –

• LENDER—For purposes of this column, Lender refers to the holder of the note on the property being sold. Loan Consultant will refer to the person who is doing the loan for the buyer. They would both be normally referred to as “the Lender” which is why I want to distinguish them here.

• ACTIVE SHORT SALE—This is where a property is listed for sale with the Real Estate Company. Being listed is the same as with any other property only it is identified as a Short Sale so both the agents and the buyers know how to deal with the property.
• ACTIVE SHORT SALE CONTINGENT—This means that an offer has been sent to the Lender. The offer was accepted by the owner of the property but now that offer has to be sent to the Lender for approval. Generally speaking it will take 60 to 90 days to get that approval from the Lender but is may be as little as 45 days and as long as a year since so much depends on the Lender involved.While in this stage, back up offers may be accepted and often are as the property is still on the market. The Lender may come back asking for more money from the buyer. That buyer may counter with more money or they may decide they don’t want the property for the price the Lender is asking. In that case, the Lender will look at the backup offers and decide which will net the most money for the Lender.
• PENDING—Pending is when the offer has been approved by the Short Sale lender and the sales is waiting to close. This after the accepted offer by the owner has been sent to the Lender.
• APPROVAL LETTER—This is a letter from the Lender approving the sale of the property. This is a demand that goes into title.
• SHORT SALE ADDENDUM—The Short Sale Addendum does two basic things. It first identifies a time period where the buyer expects a reply from the Lender. This time period needs to be reasonable like 60 to 90 days if the buyer really wants the property. The other thing has to do with the remove of contingencies. Again a normal period for the loan contingency for instance to be removed would be 17 days after the Approval Letter is received by the buyer’s agent.

One of the problems that can occur with the Short Sales is that the buyer waits for months for the Approval Letter and then the Lender wants the property to close right away. Most ask for a 30 close buy some are a little more realistic. Real Estate Agents typically will wait to ask for an extension on this time period until 3 to 5 before the estimated close so they can be more accurate on the time.

Some of the Lenders are more difficult to work with and will ask for huge fees if the property doesn’t close on time while others are more willing to work with the buyer and the buyer’s agent.

With Short Sales you need 2 things before you even get involved with one. The first thing is patience because as I said, Short Sales are an oxymoron. The second thing that is the most important thing in your success with a Short Sale is to work with a Real Estate agent who really understands Short Sales and is willing to work with them. As with any special category, Short Sales require a different mind-set. There are many wonderful agents who do not want to work with Short Sales so when you are looking for an agent and you think you might want to look at Short Sales, discuss it upfront with your agent.

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